Canadian electric vehicle producer Lion Electric Co. has landed a second major backer, with Amazon.com Inc. (AMZN) securing the right to purchase a 15.8 per cent stake in the company.
Montreal-based Lion Electric made a name for itself producing all-electric school buses and is already backed by the Desmarais family through their holding company Power Corp., which invested in 2017. In 2019, the EV maker added electric trucks to its arsenal and in the fall of 2020 announced a small deal with Amazon to produce 10 trucks for the retailer as a trial run.
The retailing giant was also awarded share purchase warrants to acquire a sizable stake in Lion, although that was little known at the time. Lion had disclosed an ownership deal with an unnamed company, but it seemed separate from the Amazon contract. The connection was recently disclosed in a securities filing issued as part of Lion’s move to list its shares on the New York Stock Exchange.
Amazon’s contract with Lion is structured in a similar format as its significant deal with Cargojet Inc., which was signed in August, 2019, and gave the retailer the right to buy 14.99 per cent of the Canadian cargo company.
As part of the Lion deal, the EV maker must reserve enough manufacturing capacity to deliver up to 500 trucks a year from 2021 to 2025 to Amazon, and the greater of 500 all-electric trucks a year, or 10 per cent of Lion’s manufacturing capacity from 2026 to 2030.
Amazon’s warrants to purchase up to 15.8 per cent of Lion can be exercised at US$5.66 per share, and they expire after eight years. To use all of the warrants, Amazon must spend at least US$1.1-billion on Lion products or services.
Lion has yet to finalize its NYSE listing, but it is going public through a reverse takeover by Northern Genesis Acquisition Corp., which already trades. Northern Genesis’s shares closed at US$23.61 on Thursday.
Lion’s relationship with Amazon dates back to 2018 when company founder Marc Bédard gave a speech at a transportation conference in Atlanta. Amazon reached out in the aftermath, then visited the EV maker’s production facility in Saint-Jérôme, just north of Montreal, according to Lion vice-president Patrick Gervais.
While the news is a major development for Lion, the company has not promoted its partnership with Amazon beyond the initial 10 truck contract – something Mr. Gervais attributed to Lion’s communications strategy.
Across the electric vehicle industry, many producers make promotional – and sometimes wildly aspirational – claims, Mr. Gervais said, “and then have to go back and say it got cancelled.” Amazon’s investment is only a potential one at the moment, based on production targets and other metrics, and the company doesn’t want to overstate it. “One of the qualities of Lion Electric is being honest,” he said.
The deal structure is one that Amazon has shown a preference for over the past few years. Beyond Cargojet, other deals in which the retailer has received warrants include contracts with Atlas Air Worldwide, Air Transport Services Group Inc. and Plug Power Inc.
In 2017, both Amazon and Walmart signed deals with Plug Power, which produces fuel cells, that give them warrants for every US$50-million they spend with the company. Amazon’s early warrants were issued with an exercise price of US$1.19, and on Thursday Plug Power’s stock closed at US$47.29.
In an e-mail, Amazon said its deal with Lion is part of a climate pledge that involves transforming its transportation network with new technology, electrification solutions and alternative delivery methods.
Lion was founded in 2008 by Mr. Bédard, and the company’s goal has been to electrify the heavy-duty vehicle industry. In its early days, Lion developed an all-electric bus before starting to work on a proprietary battery management system. The company delivered its first bus in 2016 and received an investment from Power Corp. in 2017.
“The big difference between us and other OEMs [manufacturers] is we’re selling buses and trucks today,” Mr. Bédard said in a November interview when the company announced its plans to go public. The company hopes to achieve positive free cash flow in 2023.
In November, Lion announced it will raise US$200-million through a private placement, and by going public through its deal with Northern Genesis, it will get access to the US$320-million in cash that Northern Genesis has sitting on its balance sheet.
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Published at Fri, 08 Jan 2021 00:00:52 +0000